Singapore will overtake Switzerland to become the world’s biggest offshore wealth centre by 2020, according to research.

Singapore will overtake Switzerland to become the world’s biggest offshore wealth centre by 2020, according to research on global financial trends from WealthInsight.

The global private banking industry has total assets under management of $19.3 trillion, of which $8.3 trillion – or 42 per cent – is offshore and Switzerland currently holds $2.8 trillion of cash, the organisation says. By 2016, however, Switzerland’s figure is predicted to drop below $2.0 billion.  

The Alpine state’s historical bank secrecy laws have come under relentless international assault from governments trying to halt an exodus of tax revenues. Firms such as UBS and Julius Baer, for example, no longer provide offshore banking to the US; Switzerland has also inked a number of bilateral agreements with nations over tax. The impact on Switzerland from any shift in its status will be significant: more than 80 per cent of funds held in the country are for foreign clients.

Switzerland holds 14.5 per cent of the global wealth industry’s AuM, second only to the US; offshore wealth - $2.1 trillion - makes up the vast majority of this money. Switzerland holds 34 per cent of all offshore wealth, making it the single largest such jurisdiction.

Among other figures in the report, it notes that the UK and Channel Islands is the second largest offshore player, with $1.8 trillion of assets (as at the end of 2011). Local UK private clients’ AuM stood at $780 billion. The remaining $1.02 trillion is sourced from foreign clients; most of this is held in the Channel Islands.

In third place is the Caribbean and Panama ($800 billion), followed by Singapore ($550 billion); Luxembourg ($350 billion); Hong Kong ($250 billion); and “other offshore” ($1.6 trillion).

WealthInsight argues that offshore banking “will come under increasing pressure as stricter operational procedures are introduced by governments in Europe and North America”.

The report said that in many growth markets, investors prefer, or are forced, to invest offshore, driven by lack of reputable or talented local managers as well as by a need to spread risks.

The report is bullish on Singapore: “Indeed, Singapore has the highest density of HNW individuals in the world and has become one of the world’s leading offshore wealth centres: offshore assets account for 80 per cent of the country’s total managed asset base.”

Hong Kong

As far as the former UK colony, now part of China, is concerned, Hong Kong’s private banking sector rose by 32 per cent in 2010, increasing AuM to $250 billion, 15 per cent above the pre-crisis level, with much growth driven by China.

However, China’s private banking AuM accounted for only 1 per cent of total Chinese HNWI wealth in 2011, below the worldwide average of 29 per cent. More than 50,000 Chinese millionaires are looking to emigrate every year, many of them to Hong Kong.